Obama threatens to veto tea party plan for debt ceiling

WASHINGTON (AP) - The White House weighed in with a veto threatMonday against a tea party-backed plan to let the government borrowanother $2.4 trillion, a measure conditioned on big and immediatespending cuts and adoption by Congress of a constitutionalamendment to balance the federal budget. At the same time, President Barack Obama said the two sides are"making progress" after a series of back-channel conversationswith Republicans like House Speaker John Boehner of Ohio andMajority Leader Eric Cantor of Virginia, with whom Obama met onSunday morning. Boehner called the veto threat "unfortunate," and in astatement Monday said Obama's threat "should make clear that theissue is not congressional inaction, but rather the President'sunwillingness to cut spending and restrain the future growth of ourgovernment." "If we are going to raise the debt limit and avoid default, theWhite House must be willing to demonstrate more courage than wehave seen to date," Boehner said. A Boehner aide said the "cut, cap and balance" plan is still"the best path forward" and declined to characterize thehush-hush talks with Obama. Another spokesman, Brendan Buck, said"there is nothing to report in terms of an agreement orprogress." The House set to pass the plan on Tuesday but it's sure to stallin the Senate, where majority Democrats say it would lead todecimating budget cuts and make it harder to pass tax increases onthe wealthy. The White House weighed in Monday, calling the bill an"empty political statement" that President Barack Obama wouldveto. And even if the scheme could pass, there's no way Congress willadopt a balanced budget amendment, which requires a two-thirds votein both House and Senate. Tea party lawmakers are insisting on the effort to try to puttheir stamp on the debate over the so-called debt limit, and GOPleaders - lacking other ideas that might win a majority in theRepublican dominated House - were quick to give their OK at aspirited closed-door meeting on Friday. Major rating agencies such as Moody's and Standard and Poor'shave signaled they're poised to lower the nation's coveted Triple-Acredit ratings if no agreement is reached on the nation's debt. On Monday, Moody's issued a report suggesting that the U.S.could eliminate the threat to its credit rating by removing thelegal limit on the debt. Tuesday's House vote on the cut, cap and balance plan comesafter more than a week of White House talks with congressionalleaders failed to produce a breakthrough. The tally will be heldexactly two weeks before an Aug. 2 deadline to avoid a potentiallydevastating default on U.S. obligations like payments tobondholders and senior citizens receiving Social Security. The plan doesn't actually include any spending cuts; rather, itendorses a spending cap on agency operating budgets for next yearthat the House is already working toward. The new plan promises tocut $35 billion more from so-called mandatory programs like farmsubsidies, food stamps and Medicaid, the health program for thepoor and disabled, but doesn't say where they would fall. In a statement, the White House warned that such an approachcould force significant cuts in education, research, Medicare andSocial Security, and "put at risk the retirement security for tensof millions of Americans." After the House exercise and a failed Senate vote on a balancedbudget amendment to the Constitution, Plan B appears to be to havethe Senate vote to give Obama sweeping power to order increases inthe debt limit totaling $2.5 trillion over the coming year withoutapproval by lawmakers. The hope appears to be that after trying it their way, enoughHouse Republicans will be able to stomach the emerging Senate planto allow it to pass, though it's plain there will have to be plentyof Democrats voting for it as well to make up for dozens ofunyielding lawmakers unwilling to abandon their tea party promises. For their part, Senate Republicans are demanding a vote thisweek on a balanced budget constitutional amendment, though theyhave zero chance of winning the required 67 votes in a chamberwhere they control just 47. Public opinion polls show that voters like the idea of abalanced budget, but the government faces such massive budget gaps- it now borrows more than 40 cents of every dollar it spends -that the cuts required to eliminate the deficit were too draconianfor even the GOP-dominated House to endorse balancing the budgetanytime soon. The House Republican budget still leaves deficits inthe $400 billion range after 10 years. The immediate issue is allowing the government to continue toborrow from investors and foreign countries like China to pay itsbills - which include a $23 billion batch of Social Securitypayments set to go The report Moody's issued Monday said the need for the U.S. toraise its debt limit by enacting legislation creates thepossibility of default that wouldn't exist otherwise. Removing thelegal limit on the debt would eliminate the risk that threatens thegovernment's credit rating, the report said. "We would reduce ourassessment of event risk if the government changed its frameworkfor managing government debt to lessen or eliminate thatuncertainty," said the Moody's report. With the deadline just over two weeks away and with a recentround of White House talks failing to generate a breakthrough, Sen.Mitch McConnell, R-Ky., the cagey leader of his party in theSenate, has proposed a plan that would allow Obama to automaticallywin a large enough increase in the debt to keep the governmentafloat until 2013 unless both House and Senate override him byveto-proof margins. McConnell's plan has political advantages but has come underassault from many conservatives eager to take advantage of thecurrent opportunity to use the need to lift the debt ceiling toforce deficit cuts now. But Republicans refuse to consider any taxrevenue increases demanded by Obama and Democrats to balance anybudget package, and Democrats won't go along with significant cutsto benefits programs like Medicare and Medicaid unless taxincreases on the wealthy are a part of the package. That leaves lawmakers well short of the $2 trillion-plus indeficit cuts required to offset a debt increase that's big enoughto solve the problem through next year's elections. Majority Leader Harry Reid, D-Nev. wants to add a plan to createyet another deficit panel, comprised entirely of lawmakers andevenly divided between the two parties, that would try to break thedeadlock by the end of the year. It's also expected that a package of spending cuts, perhaps inthe $1.5 trillion range over the coming decade, would be attachedto the McConnell-Reid measure, perhaps in the House.

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